Credit Card eZine - News and Articles about Credit Cards

Know how credit card deals interweave balance transfers into their plans!

2007-05-25

Balance transfers can often be a tricky subject. Many credit card companies shadow their balance transfer options and hide them within the fine print of a credit card application because this is a big money maker for them.

While balance transfers can be a great way for a consumer to save money by getting lower finance charges, it is also a way for them to get in a lot of trouble through surcharges and extra fees!

Before you just run out the door with a credit card application that you want to transfer your balance to make sure you do everything you can to keep your current card.

Many credit card companies will be willing to lower your interest rates if you just ask them. However, if they are unwilling to help you and you find a better deal elsewhere, by all means take it!

Why are balance transfers so helpful?

Balance transfers can be helpful to consumers in many ways. First, if you transfer a high balance to a credit card with zero percent interest rates then you will save literally hundreds of dollars just in interest rates alone!

These 0% interest rate credit cards usually last for 6 to 15 months, so be aware of when your introductory period is over because once it is, your interest will be far from zero!

Credit card companies just want your business and they want you to bring your money to them. If you have good credit then they will want you even more and they will likely offer you many benefits.

Some of these benefits include no annual fees (on most balance transfer credit cards), longer grace periods and other rewards programs. Credit card companies are trying to entice consumers to use their cards so they must have these extra features in order to get card holders to switch to them.

Okay, I want a balance transfer credit card, how do I do it?

What bring people to take advantage of balance transfer cards are the low interest rates. These interest rates are the what catch people’s eyes first and here is the process they under-go:

1. Filling out the required documentation that the new creditor gives you. If a credit card company wants you to transfer balances to their card then they will give you all the paperwork that you need to sift through.

2. Contact the credit card company that you want to switch to over the phone. If you call them up you will be able to find the best way to transfer balances, plus you may get some extra benefits as well!

3. Write a convenience check that switches balances. Your current credit card will provide you with checks that you can use on personal things- such as transferring balances!

However you decide to use a balance transfer, remember one thing- you can only transfer as much money as the credit line of your new card!

The costs of transferring balances

So, how much does a balance transfer cost you? Well, when it comes to special deals it probably won’t cost you anything and you will get a zero percent interest rate. However, if you just decide to transfer balances onto a card that isn’t currently running a special deal you will probably spend around 2 to 5% of the total transferred balance.

This will give you something to think about before using a balance transfer because you should only do it if it makes financial sense to do it. You won’t want to use a balance transfer if your fees outweigh your saving potential.

There are some other fees that you’ll have to be aware of as well- here are the bulk of them:

• Over the credit line fees: Yup, this is one of the biggest fees that are involved with balance transfer fees. Many people who utilize balance transfers aren’t aware of their new credit limits and if they go over they will have to pay for it!

• Late fees: The one thing that you don’t want to do is pay your credit card late or even miss a payment. This is one of the quickest ways to hurt your credit score and earn you a bad credit card deal.

Once again, you’ll either get charged a set fee or a percentage rate for paying late and just one late payment can increase your interest rate for good on a credit card! If you have a zero percent interest rate credit card, and you pay it late just once, you may get your rate pushed up to 15% or 20%!

• Lost card fees: Not every credit card company will charge you for this but some will. If you lose your credit card (which happens often) you may get charged a set fee to get a new one sent to you. Expect a $5 or $10 fee.

How to handle your payments

Once you have transferred your balances over to a new credit card it is vital to pay your bills in full and on time if you want to keep great rates and all your rewards benefits.

Don’t expect a grace period to fall back on with your balance transfer credit card because you probably won’t get one! Pay your balance on time and you won’t have to worry about it.

Also, regarding payments, remember that all the payments that you make will most likely be made toward to the balances with the lower balances and then after to your higher APR balances.

In other words, you’ll have to pay off everything that has a zero percent interest rate before you are allowed to pay off your high APRs. This is a great way for credit card companies to catch you in a trap.

It could take you the entire introductory period before you can get your 0% interest rates paid up! If possible, get two credit cards, one for balance transfers and one for daily purchases.